Original title: From Science Friction to Science Finance: A Community-Driven Revolution in Biotech Original author: Paul Kohlhaas, founder of BIO Protocol Original translation: zhouzhou, BlockBeats
Editor's note: This article introduces how the BIO protocol solves funding, R&D and market problems in the biotechnology field through the decentralized BioDAO network. Through tokenized intellectual property, decentralized governance and real-time liquidity, BIO enables patients, scientists and investors to participate in decision-making and support neglected areas such as rare diseases and long-term COVID-19. BIO breaks through the traditional fund structure, promotes innovation in biotechnology, accelerates the scientific research process, achieves more efficient and fairer capital flow and results transformation, and ultimately promotes scientific progress and global influence.
The following is the original text (reorganized for readability):
"We live in a society exquisitely dependent on science and technology, in which hardly anyone knows anything about science and technology." — Carl Sagan
TL;DR
·The Fragmented Biopharmaceutical System: Science Meets Bottlenecks.
·Andrew Lo's Mega-Fund Theory: A Milestone in Biotech Finance.
·Beyond the Mega-Fund: The Emergence of the BIO Protocol.
·From Funds to Ecosystems: Advancing Lo's vision within the BioDAO network.
·Practices of the BIO Protocol
·Orphan drugs, rare diseases, and long COVID: a moral and economic fit.
·Lessons from mega-fund inspired biotech holding companies.
·From Scientific Friction to Scientific Finance
·Bottom-Up Funding Evolution
A universal truth looms over our modern era: scientific knowledge is exploding, yet life-changing treatments—from long COVID to rare autoimmune diseases—remain out of reach for millions. This stark contrast reveals a twisted paradox: the issue is not scientific impossibility but inefficiency in market structure.
Big pharmaceutical companies invest billions into incremental improvements to existing drugs (like enhancing existing PD-1 cancer drugs or GLP-1 anti-obesity drugs) through strategies like patent lifecycle management, chasing the latest and hottest clinically validated drug targets, while research into patient-demand remains stagnant.
What is the result? An industry mired in scientific friction, with bloated costs, capital bottlenecks, and intellectual property silos making potential transformative innovations slow to progress or even completely shelved.
1. The Fragmented Biopharmaceutical System: Science Meets Bottlenecks.
Every day, thousands of people struggle with complex, debilitating, and underfunded diseases like long COVID. Many find that helping their research is not 'difficult' scientifically; rather, it is too 'complicated' for the return on investment (ROI) expected by traditional pharma. This is merely a symbol of a broader crisis, as Eroom's Law reveals: as biotech R&D spending skyrockets, the productivity of discovering new drugs plummets. How did we get here?
1.1 The Valley of Death and 'Safe Bets'.
Promising discoveries made in academia often struggle to transition to early clinical research because no one is willing to fund the risky transitional phase between animal testing and human trials. This infamous 'valley of death' hinders potential therapies that, in the eyes of big pharma, have neither profit potential nor are too risky.
Many venture capital and pharmaceutical companies adopt a 'fast follower' strategy, waiting and hoping that others will successfully navigate these risks. These risks may include decoding the pathophysiology of diseases, addressing regulatory challenges (like a lack of clear clinical endpoints), uncertain pharmaceutical acquisition commercial viability, or the dynamics of health insurance reimbursement for treatments. This is a minefield filled with incentives and constraints, but it does not leverage any collective mechanisms to empower the voices of patients.
1.2 Capital Over-Concentration.
The primary funding channels for biotechnology—big pharmaceutical companies and large venture capital firms—often concentrate investments in 'blockbuster' categories. Over 90% of biotech capital is concentrated in fiercely competitive, minimally differentiated areas, causing once-promising breakthrough research (like longevity, complex immune system diseases, or neurology research) to stagnate.
Although these clinically low-risk and commercially attractive therapeutic areas are very appealing to pharmaceutical companies and venture capitalists, many areas also represent the most expensive failures, as only 5% of approved and launched drugs can achieve blockbuster sales potential.
Otherwise, it would be a waste of vast R&D funding. In Bruce Booth's famous (Atlas 2024 Review), Bruce comments that less than 15% of biotech financing rounds have received more than 66% of available venture capital, representing a significant change compared to ten years ago. We need more meritocratic mechanisms to address public health issues and the impending tsunami of aging in Western societies.
1.3 Intellectual Property Lock-Up and Data Silos.
Under current business models, knowledge is trapped behind thick patent walls and closed-door deals, leading to slow progress. Global labs often repeat the same high-cost experiments due to a lack of shared insights, adding unnecessary friction. Patient data and clinical insights are so severely fragmented that under a unified data architecture, they could hold significant inferential value, but are bogged down by bureaucracy from hospital administrators, data aggregators, and biobanks.
Intellectual property may have time limitations, and only certain specific forms (like substance composition patents) have significant value to venture capital and pharmaceutical companies, which contrasts with the longevity community's enthusiasm for repurposing drugs (like rapamycin, ursolic acid, and metformin). Overall, inefficiencies in resource allocation and commercial constraints suppress health transformations in the real world, and real-time transparency can help alleviate some of these issues.
1.4 Opaque R&D and Limited Accountability
The process of rolling out R&D pipelines is slow and intricate. Capital flows are hidden; outsiders cannot see whether trials are failing (or why) until it is too late. Accountability is limited, leaving patients and the public in the dark.
Management teams and R&D groups are in constant flux, and as teams change, so do the R&D pipelines. Companies like Roivant build successful large enterprises by licensing and developing strategically shelved drugs.
1.5 Over 10 Years of Capital Lock-Up Stifles Innovation.
Traditional biotech investments often require ten years or longer to yield returns—in a fast-paced market, that is almost eternity. This lack of liquidity leads to early-stage research being underfunded, especially in cases with uncertain outcomes.
Compared to clinical and scientific explanations of drug treatment potential, biotech competes for capital allocation against other asset classes (such as more easily understood income/EBITDA growth). In this case, open communities help bridge the gap in the relative value of these therapies in terms of education and socialization.
Biotechnology is at a disadvantage in attracting investors and gaining market share, while other health-related themes (like longevity) have become cultural phenomena. Certain biomedical breakthroughs (like statins, PD-1 inhibitors, or anti-obesity drugs) have demonstrated remarkable commercial potential (e.g., a 93% return in 2024 for Obesity 5 (NONO, LLY, AMGN, ZEAL, and VKTX)), but the investment structure needs significant revision to ensure the value of these transformative innovations is not diminished and to ensure better accessibility for investors—this is precisely where tokenization will bring about change.
Eroom's Law contradicts the immense scientific progress we are experiencing—such as DeepMind's AlphaFold2, the 2024 Nobel Prize in Chemistry, mRNA therapies, GLP-1, and cell and gene therapies. The business and stakeholder models in the pharmaceutical and biotech industries have rarely been questioned, and they would warmly welcome operational structures that could help improve efficiency.
Andrew Lo's Mega-Fund Theory: A Milestone in Biotech Finance
In 2012, MIT professor Andrew Lo and his collaborators proposed the concept of a 'mega-fund'—a large, diversified early drug candidate portfolio. Holding 50 to 200 relatively uncorrelated assets can spread risk: a single biotech startup might go bankrupt if its only treatment fails, but a portfolio can withstand multiple failures as long as a few successful projects can yield returns.
This theory groundbreakingly points out the structural inefficiencies in funding life sciences R&D. However, Lo's approach remains top-down: large checks from institutional investors and top-down funding allocations leave ordinary scientists or patients with little opportunity to participate in meaningful decision-making.
3. Beyond the Mega-Fund: Entering the BIO Protocol.
Now, a wave of decentralized science is emerging, further pushing Lo's vision. The BIO protocol draws on the core concept of the mega-fund—managing risk through widespread diversification—but reimagines the way this diversification, governance, and capital formation occur. The BIO protocol is not like a single large fund managed by a central authority; rather, it facilitates a governance treasury of thousands of BioDAOs, each focusing on a specific scientific subfield. This greatly expands the possibility space while allowing for community self-governance.
·Acting as a decentralized token holder governance protocol, orchestrating and incubating BioDAOs. These are specialized, bottom-up communities that own and guide R&D through on-chain research portfolios.
·Through IPT (Intellectual Property Tokenization), intellectual property and data are tokenized, making them tradable liquid assets, allowing BioDAO researchers and communities to access liquidity earlier than is common in the biotech industry.
·Deploying capital in real-time directly into the 'valley of death'.
·Placing patients, scientists, and ordinary people at the core, just like the Reddit community has a common bank account.
3.1 Unlicensed Stakeholders
In BioDAOs, anyone directly related to a disease—be it patients, clinicians, or scientists—can join through on-chain governance. Rather than passively hoping for 'someone' to fund their cause, they raise capital through collective crypto funding, form DAOs, and seek research ideas collaboratively from both internal and global scientists, deciding how to allocate and prioritize resources.
3.2 Tokenized Intellectual Property and Data
BioDAOs issue IP tokens (IPTs) through @molecule_dao, representing decentralized governance rights over research. These tokens can be licensed, traded, or pooled, effectively providing DAOs with a new way to reduce the risks of early science based on milestone funding deployments. Shared data and data replication are no longer an afterthought but a core, liquid asset capable of driving scientific discovery. Additionally, prizes can be issued to various researchers, creating incentives for decentralized science and drug discovery.
3.3 Bottom-Up Capital Formation.
Unlike the mega-fund's reliance on large institutional investors, the BIO protocol coordinates community-driven fundraising. Through its launch platform, BioDAO founders can pitch their research, set up private or public token sales, and reward early supporters with governance rights—without the need for venture capital or big pharma review.
4. From Funds to Ecosystems: Advancing Lo's Vision within the BioDAO Network.
4.1 The 'Meta Portfolio' of Decentralized Centers
The BIO protocol does not hold 200 assets as a single entity but facilitates a governance treasury of thousands of BioDAOs, each focusing on a specific scientific subfield. This greatly expands the possibility space while allowing for community self-governance. There is no single manager making decisions; instead, the protocol guides the asset development, risk management, and synergies of all these DAOs through its token holder community.
4.2 Unlicensed Launch Platforms and Acceleration
The real-time decentralized launch platform mechanism of BIO—such as bonding curves or auctions—enables new BioDAOs to launch quickly. Early stakers or token holders can indicate which areas are worth investing in. This approach not only democratizes biotech funding but also accelerates capital flow into neglected areas like long COVID or rare autoimmune diseases.
4.3 On-Chain Risk Management.
The mega-fund reduces risk through portfolio theory, and so does BioDAO, but on-chain analytics enable them to share standardized reports of clinical milestones, IP valuations, and treasury data. This facilitates real-time insights, allowing the protocol to further diversify risk or rebalance by allocating funds across multiple DAOs or establishing research-based obligations.
4.4 Continuous Liquidity and Evergreen Capital.
Traditional funds lock up capital for ten years, while BioDAO tokens and intellectual property tokens maintain liquidity, allowing participants to exit or reconfigure capital. If a BioDAO's therapy begins to show promise, it naturally attracts more liquidity. The game theory here is that therapies will naturally become the 'Schelling point' for capital. Meanwhile, revenues from successful therapies will flow back into the protocol treasury (BIObank), cycling capital back into new or existing DAOs.
5. Protocol Practices: A holistic, bottom-up ecosystem.
Envision a team of scientists proposing a new 'NeuroDAO' aimed at developing innovative treatments for traumatic brain injuries. They upload preclinical data and a funding roadmap onto BIO's user-friendly launch platform. The global BIO community stakes tokens to approve or reject the proposal—without a small committee operating behind closed doors. Upon approval:
·NeuroDAO mints its Intellectual Property Tokens (IPTs).
·Selling these tokens through bonding curves or auctions to raise initial capital.
·As milestones (like preclinical endpoints) are achieved, more capital will automatically unlock.
·Broader communities can track progress, invest further, and accelerate the flywheel effect.
If NeuroDAO reaches a major breakthrough moment—such as discovering a new molecule that accelerates brain recovery—intellectual property licensing agreements can funnel revenue into the treasury, funding further research. This mechanism creates a sustainable flywheel effect, driving a self-reinforcing cycle.
Since its establishment, the BIO ecosystem has grown rapidly. In less than two years:
·Funded 8 BioDAOs.
·$30 million raised for research.
·The total value of tokenized intellectual property exceeds $50 million.
·Over $60 million in funds in the BIO treasury (AUM).
·To date, $8 million has been allocated to scientific projects funded by BioDAOs.
·60 active R&D projects.
·34,000 ecosystem token holders (of which 3,716 hold BIO governance tokens).
Multiple BioDAOs have rapidly advanced from seed-stage research to advanced preclinical research, validating that decentralized capital and open collaboration can accelerate biotechnology innovation.
Orphan drugs, rare diseases, and long COVID: a moral and economic fit.
Long COVID is just one example of a 'niche' yet urgent condition. Similarly, orphan diseases—those affecting smaller patient populations—are often overlooked by large pharmaceutical companies because they perceive limited profit potential.
But in networks like BIO, patient-led or family-led BioDAOs can form around any disease, leveraging new structures to fund research that large companies are reluctant to support. Smaller patient populations can accelerate clinical trials, shorten timelines, and unlock significant returns without the 'hit or miss' mentality. The moral consistency is evident: it's not about market size; it's about impact.
7. Real-World Momentum: Lessons Learned from Mega-Fund Inspired Companies.
Before decentralized science, multi-asset risk-sharing models had been attempted in various forms:
·BridgeBio (NASDAQ: BBIO): Focused on rare diseases with a hub-and-spoke pipeline.
·Roivant Sciences: Launching independent 'Vants' for each therapeutic area, integrating management fees and capital.
·Royalty Pharma: A portfolio with billions of dollars in diverse royalty income streams that proves securitization can provide stable funding for drug intellectual property.
These companies embody Lo's principle of diversification. The BIO protocol extends this principle further by democratizing access, distributing governance rights, and achieving continuous liquidity through tokenization.
8. From Scientific Friction to Scientific Finance (SciFi)
Close your eyes and imagine it is now 2026. Under the framework of BIO, there are already hundreds of BioDAOs addressing a variety of diseases from pancreatic cancer to autoimmune alopecia. Each DAO is a 'community collective intelligence' made up of patients, researchers, and philanthropic supporters. They:
·Access real-time research data shared across networks, accelerating the advancement of each clinical turning point.
·Coordinating clinical trial participants and best practices (if multiple BioDAOs are addressing related fields, BIO can facilitate shared participant pools, data registries, and best practice governance, reducing administrative overhead).
·Using AI to assess risks, potential synergies, and capital allocation.
No longer are ten-year capital lock-ups or heavily gated institutional barriers hindering breakthroughs. Instead, the whole network acts like a living, breathing organism—fluid, adaptive, and open.
8.1 The Golden Age of Biotech
By 'tokenizing everything', from preclinical data to late-stage intellectual property, along with decentralized governance, BIO brings the industry's biggest friction points to light. Suddenly, drug development feels more like science fiction than a long marathon.
8.2 Inclusive Communities, Global Impact.
This revolution is not just happening within laboratories. Ordinary investors—those whose loved ones may have rare diseases—can stake tokens to support new research and see transparent progress along the way. Collaboration is no longer a buzzword; it is an on-chain reality driving the formation of cross-border research teams.
8.3 Reversing Eroom's Law
With friction eliminated, communities from any region can access global funding, and we may finally see the cost/time curve of drug development bend downward instead of upward—realizing the promised exponential scientific advances.
9. The Bottom-Up Evolution of Biotech Financing
Andrew Lo's mega-fund theory points to an important path: large, diversified portfolios can tame the high risks of biotechnology and attract larger-scale capital. However, top-down structures and institutional inertia still stifle some innovations. In contrast, the BIO protocol disrupts this script:
·Community-Driven: Anyone with a stake—patients, scientists, or curious funders—can participate in governance, propose new BioDAOs, and co-shape research directions.
·Tokenized Intellectual Property: Data and intellectual property become fluid, paving the way for new funding and collaboration models.
·Real-Time Liquidity: Freed from ten years of capital lock-up, capital can quickly flow to breakthrough innovations.
·AI-Driven Risk Management: On-chain analytics continuously track performance, synergies, and correlations, allowing capital to flow efficiently between multiple BioDAOs.
By stacking decentralized science solutions (via BioDAO) under a top-level coordination of BIO, the most daunting challenges in science and pharma can be addressed in a community-driven, transparent, and continuously flowing environment.
By placing families, patients, and scientists at the core of decision-making, BIO aims to 'boil the ocean' and resolve the dilemmas in early innovation. No longer will half of the world's great ideas rot in the 'valley of death.' Instead, we witness the dawn of a scientific era unbound from outdated gatekeepers and friction-filled pipelines.
So next time your family faces a rare disease, the deciding factor is no longer the board's analysis of market size. Instead, it is a global network—scientists, patients, and ordinary believers—coordinating, funding, and accelerating the truly important therapies. In short, we have returned to a sci-fi world where humanity finally unites to turn the impossible into the inevitable.
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